[BN] the know

Cuomo signs extensions for ‘temporary’ county sales tax surcharges

Extensions every 2 years belie ‘temporary’ status

New York Gov. Andrew Cuomo mingles with guests following an event to mark the end of a four and a half year dispute between the state and the Seneca Nation of Indians over the casino compact at First Niagara Center, Wednesday, July 31, 2013. (Derek Gee/Buffalo News)

ALBANY – Sometime before midnight Wednesday, without fanfare or ceremony, Gov. Andrew M. Cuomo signed measures that extended or increased local sales tax levies in nearly two dozen counties around the state.

It was another biennial action that no governor really wants to take, as it allows counties to collect hundreds of millions of dollars from local taxpayers. The approvals included Niagara, Cattaraugus and Wyoming counties. Erie County is expected to obtain that permission later this month.

Cuomo and his three immediate predecessors tried to do away with the practice and leave the local sales tax decisions solely up to county officials.

But taxes dubbed “temporary" have a way of becoming permanent. And nothing is more permanent – in this case more than 40 years – than the process of local governments getting permission from Albany every two years to keep sales tax surcharges in place.

“If you’re making it temporary, the public has a right to assume it’s not going to stick around forever. But in the vast majority of cases, temporary in Albany becomes permanent,” said E.J. McMahon, director of the Empire Center for New York State Policy, a conservative think tank.

“This whole way of doing it is a sham, pretending something is temporary that everyone believes is actually permanent,” he added.

Current law requires that any county seeking to raise its sales tax higher than 3 percent must obtain local lawmakers’ approval, then go to Albany for State Legislature permission.

Today, only four counties – Saratoga, Warren, Washington and Westchester – are still at the 3 percent level, which, when combined with the state’s 4 percent levy, raises the total sales tax to 7 percent. The state’s highest total rate – 8.75 percent – remains with two counties that have held the record for several years: Erie and Oneida, based on the counties’ 4.75 percent levy.

There is, of course, considerable politics associated with the sales tax extenders. It was no surprise that the dozens of this year’s extenders did not occur until the final couple of days of the legislative session in June. That gave state lawmakers plenty of time to put pressure on county executives or local lawmakers if there was something they wanted done back home.

It’s also an extremely handy tool for politicians to use against a lawmaker running for re-election or a higher office. Campaign ads slamming lawmakers for backing tax increases are common, and opponents use these sales tax bills as regular ammunition.

If the process is a pain for counties, it is an unwelcome political moment for governors, who can rightfully say they are merely agreeing to a home-rule message that local officials requested to raise or extend sales taxes.

Cuomo has made much out of his opposition to tax hikes. During his campaign in 2010, he spoke against extending a tax on wealthy individuals, a tax he later extended when he became governor.

But the sales tax situation is different; it must originate with county officials. Four governors in a row, starting with George E. Pataki, have tried to undo the process. Cuomo this year failed in his budget to get approval for a rule that would make permanent all current local sales tax levels, provided that county lawmakers approve them every two years.

While the Senate in the past helped block the idea, it helped Cuomo push the proposal this year as Senate Republicans hold a narrow power base.

Cuomo’s budget message said the current process creates “unpredictability that makes it difficult for local officials to manage their budgets.”

But the proposal died in the Assembly. “Members from across the state have raised concerns about the need to have periodic review of the revenue needs of their local governments,” said Michael Whyland, a spokesman for Assembly Speaker Sheldon Silver.

Even anti-tax advocates like McMahon say the process does create a check-and-balance situation. “It is one of the few choke points on a tax increase. It’s one of the few places where politicians are required to stand up and take a consequential vote,” he said.

But county officials see it as a biennial pain. “It’s an unnecessary use of state legislative time, and it creates a crisis when they pass these bills at 5 in the morning on the last day of session,” said Stephen Acquario, executive director of the New York State Association of Counties, which tried to push the Cuomo change proposal.

After nearly 50 years of holding out, Hamilton County in the Adirondacks, the state’s least-populated county, this year joined the state’s other counties pushing past the 3 percent ceiling. A legislative document said decreasing state revenues and mandated costs are worsening, “making the county’s financial situation unsustainable.”

Erie County’s sales tax extension was approved locally in late June and joins a couple dozen other counties waiting for their legislation to be sent to Cuomo to be signed. Erie County’s surcharge is worth $265 million in annual revenues, according to a state legislative memo that warned of massive property tax hikes or widespread service cuts without its approval.

In Erie County, which has had its share of political battles over sales tax, a drop from 8.75 percent to 8 percent would cost the county $113 million in lost revenue, officials said Thursday. “If we didn’t get these sales tax extensions, it would destroy Erie County’s budget. Erie County could not be sustained without these sales tax extensions,” said County Executive Mark C. Poloncarz. He said he “implores” the governor to sign the Erie County sales tax bill when it reaches his desk.